W hy did you set up Homes Group?
I set up Homes Group after retirement because I am not tired yet. I want to contribute my quota further by setting The Homes Group as mother of the three members of the group- Rural Homes Ltd, Rural and Urban Homes Ltd and Distinctive Homes Ltd. The whole point of having three companies is to cater for all segments of the society adequately.
The idea came because of my previous experience .I realized that the business of real estate development is not a joke so therefore if you want to grow you have to go into partnership where you can have financial inter-mediation to make impact because it is capital intensive. So at Homes Group, partnership is very important to us as we are looking beyond the local industry for investment opportunities with which we can develop local technology and expertise so that within six months to a year we can attain building between 5,000 to 10,000 units of housing especially with regards to the exigent needs of the country.
Another reason for setting three strata companies is that in reality if you put all your portfolios or egg in one basket, you risk losing them in adverse circumstances and by dividing them, each company can concentrate and specialize in different parts of the real estate sector.
The Rural Homes Limited will concentrate on building affordable housing ranging from N 5-30 Million, Rural and Urban Homes Limited is focused on the middle class, from N 30-70 Million, whereas Distinctive Homes Limited will serve the upper echelon starting from N 70 Million. In each case the customer will dictate the tune; we will satisfy his needs according to his/her budget, using the right company to deliver.
H ave you commenced any of these projects?
Yes, Rural Homes Ltd, in partnership with Abuja Investment Company Ltd (AICL), is constructing stalls/ shops and warehouses for the newly planned Karmo District Market in Abuja, in a befitting, modern and international standard. It is our hope that within 18 to 24 months we will Insha Allah commission that market.
There are 1,800 shops in different sizes and designs available for all categories of goods and services. This market is an investment opportunity for everybody in Nigeria and beyond! This is because the Nigerian wholesale and retail industry (which accounts for 16.4% of GDP) remains a lucrative investment opportunity on the back of a large and rising population and an increased rate of urbanization a market like this is needed.
The market is close to the Idu railway station which is an added advantage to any serious commercial? Business Man/Woman engaged in trading or as an investment that will yield revenues to the owner.
W hat does it consist of?
They are shop units with practical spaces from 4 sqm ,9 sqm ,16sqm up to 100 sqm. The warehouses are a whopping 100 square meter size. This is a big opportunity for the growing e-commerce websites and sectors. All warehouses have their own amenities and they come with entrance ramps and offloading bay.
Our Cold-room design is world standard. There is an absence of refrigerated space to accommodate agricultural and perishable product which is important to Karmo District Market will utilize this opportunity effectively because half of Nigeria’s fruit and vegetables spoils before it gets sold. We can eliminate this problem for suppliers by storing the perishable from the farm. This is a market for everybody from retailers like tomato, onion sellers etc, to tailors; and office spaces for large companies, e- commerce retailers i.e online retailers who need space for their goods.
D oes it require initial deposit; What is the price range?
Yes, 30% deposit is required but the prices are affordable and the period of payment is one year. It starts from N 1.5 to N 35 million and there are about seven types of shops being developed by Rural Homes Ltd. They are also discussing partnership, and are waiting for approval for some 76 houses along Kubwa-Suleja road in Dawaki District. Distinctive Homes has gone into partnership with someone who has a small land of about 1,500 square meters and are almost done building terraces of 4 Bedroom with 1 Bedroom BQ which are up for sale already. It is located at Durumi District of Abuja, near the American International School.
Rural Homes Ltd is doing a feasibility to find land that we can build in volumes and use economies of scale to reduce the costs and then prices can crash. But at the moment Rural and Urban Homes for the middle cadre have not started anything but are in talks for partnerships. We also are looking at the possibility of working with FCTA in this regard.
U rban shelter started small but grew into a conglomerate. What were the challenges then and how do you intend to use experience now?
Yes, the challenges are many. Firstly, we have an economy that cannot give us capital required. This has been the trend for a while; we have 17 million housing deficit, if you ask me with my 25 years‘ experience in Urban Shelter how many houses have we built? I will say 20,000 houses although the company is not only into housing but commercial buildings too.
Construction as I said is capital intensive and the banks cannot give out long term loans so whatever plans you have must be within three years and that is why the cost of funds is passed to the customer. That is why developers are only building for the top echelon; the few three percent in the society that can pay. However there is change now, the few three percent are no longer coming forward so therefore we decided to look inward where you can provide affordable houses through mortgages, ranging between N 3 -15 Million which the banks can create mortgages for. And even these mortgages when they are created are in two digits interest rate which is still not good for housing. This is the fundamental challenge.
Then there are other challenges. Today inflation officially is about 16% and growing on daily basis, so the bank that will give you loan are using the same market so that they will hike their interest also. It’s a vicious circle that is making business difficult. Then the materials pricing keep fluctuating when construction is period is within the 18-24 months period, you find that your budget is no longer the same. Again there is the issue of land especially in places like Kano, Abuja and Port-Harcourt where they are expensive. But from experience we now use some techniques like partnership with land owners because, for example, if you want 100 hectares you must pay a billion Naira and above, so even if your profit margin is between 15-20%, the final price is beyond reach. These are some of the challenges are not insurmountable, in other climes the government subsidies houses; in Nigeria we are only good at doing conferences and holding house shows where it is the same story year in year out. But we still have hope.
T he Federal Government has introduced a mortgage refinancing company has it succeeded in addressing the mortgage gap you mentioned?
We must first understand the country’s mortgage market is undeveloped and underutilized. According to World Bank, from 2004 to 2012 0nly 44,000 mortgages were issued in Nigeria, the ratio of outstanding mortgages to GDP is 0.6% compared to 35 % in South Africa. This is the situation the NRMC found it. We should judge them relative to the point where they started, so they have not succeeded yet but are on track. They were established boost access to mortgage loans and reduce the lending rate from the current level above 20% to a single digit. The firm helps by deploying its capital in three ways by buying up bundles of mortgages from commercial banks and reissuing them on more favorable terms, establishing guaranteed mortgage facilities for low income borrowers and developing new Micro-Finance products for housing. They hope to and are on track to provide 20 years mortgages at 4-9%.
In time the NRMC will enable the construction of 75,000 new homes a year. Though I am not sure the percentage of the goals they have reached, it is worth mentioning the success of mortgage financing and closing the gap does not rest solely on NRMC, FMBM and government alone. It requires the private companies; private banks both large and Micro-Finance, private funds, foreign direct investment and even the customers, by paying back on time. This has to be collective effort by all Nigerians even you the press (Newspapers and TV) must help in communicating this to your audience.
B ut despite these problems you were still able to make a success of Urban Shelter.
Yes, Urban Shelter started in 1991 when cement was N 50 per bag but by 2015 when I left it had gone up to N 1,500 so we were successful then because Abuja was a virgin land and we came in the right time when there was demand, people were looking for offices, houses and then the economy was not bad.
B ut even now those are still in demand?
Yes, but again we don’t compromise on quality.
I mean how were you able to surmount the financial difficulty?
Yes, we targeted people with money, the middle cadre and the top echelon, these people don’t go for mortgage but now it has changed because the people with the money are not forthcoming. Necessity is of course is the mother of invention, so we have to be able to build a house that even a taxi man can afford, how we do this, we start looking inward like using bricks in the Brick City Estate. So government should restructure the Federal Mortgage Bank of Nigeria (FMBN) and recapitalize it. If they inject N 250-350 Billion into it they can create a lot of mortgages. And ensure the money is not siphoned. Or give sovereign guarantee to an investor (even foreign) say billions of dollars or naira just for mortgages for say 20 years at low rates at one digit like 3-7% this will bring a chain of activities apart from the financial gains.
Interview By: Mustapha Suleiman For DAILY TRUST, Monday, August 15, 2016